Providing coverage in times of crisis and beyond}

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1 Providing coverage in times of crisis and beyond}

2 The International Labour Organization The International Labour Organization was founded in 1919 to promote social justice and, thereby, to contribute to universal and lasting peace. Its tripartite structure is unique among agencies affiliated to the United Nations; the ILO s Governing Body includes representatives of governments, and of employers and workers organizations. These three constituencies are active participants in regional and other meetings sponsored by the ILO, as well as in the International Labour Conference a world forum that meets annually to discuss social and labour questions. Over the years the ILO has issued for adoption by member States a widely respected code of international labour Conventions and Recommendations on freedom of association, employment, social policy, conditions of work, social security, industrial relations and labour administration, and child labour, among others. The ILO provides expert advice and technical assistance to member States through a network of offices and multidisciplinary teams in over 40 countries. This assistance takes the form of labour rights and industrial relations counselling, employment promotion, training in small business development, project management, advice on social security, workplace safety and working conditions, the compiling and dissemination of labour statistics, and workers education. ILO Publications The International Labour Office is the Organization s secretariat, research body and publishing house. ILO Publications produces and distributes material on major social and economic trends. It publishes policy studies on issues affecting labour around the world, reference works, technical guides, researchbased books and monographs, codes of practice on safety and health prepared by experts, and training and workers education manuals. The magazine World of Work is published three times a year in printed form by the Department of Communication and Public Information and is also available online at You may purchase ILO publications and other resources securely on line at or request a free catalogue by writing to ILO Publications, International Labour Office, CH-1211 Geneva 22, Switzerland; fax +41 (0) ; pubvente@ilo.org

3 World Social Security Report 2010/11 Providing coverage in times of crisis and beyond

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5 World Social Security Report 2010/11 Providing coverage in times of crisis and beyond INTERNATIONAL LABOUR OFFICE GENEVA

6 World Social Security Report 2010/11 Copyright International Labour Organization 2010 First published 2010 Publications of the International Labour Office enjoy copyright under Protocol 2 of the Universal Copyright Convention. Nevertheless, short excerpts from them may be reproduced without authorization, on condition that the source is indicated. For rights of reproduction or translation, application should be made to ILO Publications (Rights and Permissions), International Labour Office, CH-1211 Geneva 22, Switzerland, or by pubdroit@ilo.org. The International Labour Office welcomes such applications. Libraries, institutions and other users registered with reproduction rights organizations may make copies in accordance with the licences issued to them for this purpose. Visit to find the reproduction rights organization in your country. World Social Security Report 2010/11: Providing coverage in times of crisis and beyond International Labour Office Geneva: ILO, 2010 ISBN (print) ISBN (web pdf) International Labour Office social security / scope of coverage / gaps in coverage / social security policy / role of ILO / developed countries / developing countries ILO Cataloguing in Publication Data The designations employed in ILO publications, which are in conformity with United Nations practice, and the presentation of material therein do not imply the expression of any opinion whatsoever on the part of the International Labour Office concerning the legal status of any country, area or territory or of its authorities, or concerning the delimitation of its frontiers. The responsibility for opinions expressed in signed articles, studies and other contributions rests solely with their authors, and publication does not constitute an endorsement by the International Labour Office of the opinions expressed in them. Reference to names of firms and commercial products and processes does not imply their endorsement by the International Labour Office, and any failure to mention a particular firm, commercial product or process is not a sign of disapproval. ILO publications and electronic products can be obtained through major booksellers or ILO local offices in many countries, or direct from ILO Publications, International Labour Office, CH-1211 Geneva 22, Switzerland. Catalogues or lists of new publications are available free of charge from the above address, or by pubvente@ilo.org Visit our web site: Graphic design Photocomposed in Switzerland Printed in Switzerland PAP WEI STA

7 Preface Social security is a human right as well as a social and economic necessity. All successful societies and economies have employed development strategies where social security systems played an important role to alleviate poverty and provide economic security that helps people to cope with life s major risks or the need to quickly adapt to changing economic, political, demographic and societal circumstances. The crisis has shown that social security systems are by design powerful economic and social stabilizers of economies and societies. They stabilize income of individuals who are affected by unemployment or underemployment and hence help to avoid hardship and social instability. They also stabilize aggregate domestic demand in times when external demand contracts due to reduced economic activity. We have also learned from past crises that countries that had effective and efficient social security systems in place before a crisis hit were much better equipped to cope with its fallout than those who had not had the foresight to put such systems into place. It is also clear that income transfers through social security have a powerful effect on the income inequality and poverty in developing countries. There is little hope that the MDG targets will be reached without a decisive global move towards introducing a national social protection floor of basic social security benefits in countries where no such scheme exists or where they only have a limited coverage. The Declaration of Philadelphia 1 in 1944 established the solemn obligation of the International Labour Organization to further among the nations of the world programmes which will achieve, among others, the extension of social security measures to provide a basic income to all in need of such protection and comprehensive medical care. In une 2008, the ILC confirmed this mandate in the ILO Declaration on Social ustice for a Fair Globalization. In 2003 the ILO launched a Global Campaign on Social Security and Coverage for All. This requires the definition of effective and sustainable national social security policies. Sound policies have to be based on facts and figures. Only through indepth factual information about the performance of existing social security systems v 1 The ILC adopted the Declaration concerning the aims and purposes of the International Labour Organization at its 26th Session in Philadelphia on 10 May 1944.

8 World Social Security Report 2010/11 and individual schemes all around the world can national policies benefit from global experience. This report provides such information. It is the first in a series of World Social Security Reports which will also help to monitor the global progress on social security coverage and thus support the ILO s and national campaigns to extend coverage. Each new edition of the report will take up one specific topic. This time for obvious reasons it had to be the crisis. It ends with repeating the plea of the Global obs Pact that was adopted by the constituents of the ILO in une 2009 and requested countries to make full use of social security systems when coping with the social and economic fallout of the crisis. It requested countries to develop adequate social security for all, drawing on a basic social protection floor including access to health care, income security for the elderly and persons with disabilities, child benefits and income security combined with public employment guarantee schemes. We hope that this report will be a useful tool for all who have to design, implement, manage, administrate or as the case may be defend social security systems. If you have feedback for us that would help us to improve the next version please post your comments on our web platform: ShowTheme.do?tid=1985 vi Assane Diop Executive Director Social Protection Sector International Labour Office Michael Cichon Director of the Social Security Department Social Protection Sector International Labour Office

9 Contents Preface Abbreviations v xv vii Executive summary Introduction. Context, objectives, scope and structure of the report... 7 Part I. Monitoring the state of social security coverage Definitions, standards and concepts Basic definitions The scope of social security as defined by ILO standards and by other international organizations Coverage concepts and measurements Scope of social security coverage around the world: Context and overview The labour market context Scope of comprehensive coverage by statutory schemes Effective comprehensive population coverage Social health protection coverage Definition and measurement of social health protection Financing health care Gaps in health-care coverage and access deficits Coverage by social security pensions: Income security in old age From legal to effective coverage by old-age pensions: An overview Coverage gaps and employment status of the elderly Effective extent and level of coverage at the country level

10 World Social Security Report 2010/11 5 Income support to the unemployed Scope of coverage by statutory unemployment schemes Effective extent and level of coverage Coverage by other branches of social security Employment injury Maternity protection Minimum income support and other social assistance Investments in social security: Amounts, results and efficiency Introduction Resources allocated to the financing of social security across the world Measuring effectiveness and efficiency of investments in social security: An overview of approaches in selected international organizations Identifying factors for extended social security coverage viii PART II. Thematic focus: Social security in times of crisis Responding to economic crisis with social security Introduction Cushioning the impacts of unemployment while protecting and creating jobs The expansion of social security as a crisis response Consolidating social expenditure: Short-term versus long-term concerns Impact of the crisis on pension funding: The need to revisit recent pension reforms Impact of the crisis on social health protection financing Conclusion. Closing the coverage gaps and building social security for all Bibliography Statistical Annex Part A. The demographic, economic and labour market environment Part B. Social security coverage and expenditure

11 Contents Tables 2.1 Employees (wage and salary workers) in the labour market worldwide, Participation in the labour market of elderly (65+), and life expectancy at age 65, Projected elderly population in 2010 and Unemployment protection: Extent of legal and effective coverage, countries grouped by income level, latest available year Social security expenditure by region and globally, latest available year Social security expenditure by income level and globally, latest available year Structure of social security receipts by type and sector of origin, 27 EU Member States, Effectiveness and efficiency of social security cash transfers received by households, and taxes paid by households, 22 OECD countries, mid Concentration coefficients of benefits in different branches of social security, 27 OECD countries, mid Legal provision, resources committed and coverage achieved in 146 countries: A typology Unemployment schemes in different country groups by income level, Crisis response: Extending coverage and raising benefits, selected countries, Crisis response: Reductions in contributions, selected countries, ix Figures Figure S.1 Figure 2.1 Social security expenditure by income level and branch, weighted by population, latest available year (percentage of GDP) Employees (wage and salary workers) in total employment worldwide, latest available year (percentages) Figure 2.2 Latin America: Social protection coverage among employees according to type of contract, Figure 2.3 Countries grouped by level of vulnerability, poverty and informality combined, latest available year Figure 2.4 Branches of social security: Number covered by a statutory social security programme, Figure 2.5 Date of the first law adopted for each contingency, countries grouped by Human Development Index (HDI), latest available year Figure 2.6 Branches of social security: Countries with statutory programmes or limited provision, latest available year (percentages) Figure 3.1 WHO: Towards universal health coverage Figure 3.2 Health-care financing: Total and public per capita expenditure by national income level of countries, Figure 3.3 Health-care financing levels and sources of funds, 2006 (percentage of GDP) Figure 3.4 Vulnerability of countries and sources of funds: Public and private health expenditure and composition of health expenditure by level of vulnerability at the country level, 2006 (percentage of GDP)... 38

12 World Social Security Report 2010/11 x Figure 3.5 Share of out-of-pocket expenditure as a percentage of total health expenditure by level of country vulnerability, latest available year.. 40 Figure 3.6 Out-of-pocket expenditure as a percentage of total health expenditure by poverty incidence, 2006 (percentage of people living on less than US$2 PPP per day) Figure 3.7 Health protection: Proportion of the population covered by law, latest available year (percentages) Figure 3.8 Deficits in legal health protection coverage by vulnerability at the country level, latest available year (percentage of population not covered) Figure 3.9 ILO access deficit indicator, 2006 (shortfall of skilled medical professionals as a proxy) Figure 3.10 The global deficit in social health protection coverage and effective access to health services in 2006 (ILO methodology) Figure 4.1 Old-age pensions: Legal coverage and effective active contributors in the working-age population, by region, (percentages).. 46 Figure 4.2 Old-age pension beneficiaries as a proportion of the elderly by income level, various countries, latest available year Figure 4.3 Old-age pension beneficiaries as a percentage of the population above retirement age, latest available year Figure 4.4 Old-age pensions: Effective active contributors as a percentage of the working-age population by the share of wage employment in total employment, latest available year (percentage of workingage population) Figure 4.5 Persons above retirement age receiving pensions, and labour force participation of the population aged 65 and over, latest available year (percentages) Figure 4.6 European Union: Old-age pension recipients, ratio to population over the legal retirement age (excluding anticipated old-age pensions), Figure 4.7 Africa: Old-age pensioners (all ages) as a proportion of the elderly population, latest available year (percentages) Figure 4.8 Asia Pacific and the Middle East: Old-age pensioners (all ages) as a proportion of the elderly population, latest available year (percentages) Figure 4.9 Latin America and the Caribbean: Old-age pensioners (all ages) as a proportion of the elderly population, latest available year (percentages) Figure 4.10 Male and female old-age pensioners (all ages) as a proportion of male and female populations respectively, aged 60 and over, latest available year (percentages) Figure 5.1 Existence of unemployment protection schemes by type of scheme, Figure 5.2 Unemployment protection schemes by type of scheme, Figure 5.3 Unemployment protection schemes: Legal extent of coverage worldwide as a percentage of the economically active population (EAP), latest available year

13 Contents Figure 5.4 Unemployment protection schemes: Legal extent of coverage, regional estimates, as a percentage of the economically active population (EAP), latest available year Figure 5.5 Unemployment: Effective coverage worldwide unemployed who actually receive benefits, latest available year (percentages) Figure 5.6 Unemployment: Effective coverage, regional estimates unemployed who actually receive benefits, latest available year (percentages) Figure 5.7 Unemployed receiving unemployment benefits, selected countries, latest available year (percentage of total unemployed) Figure 6.1 Types of scheme providing protection in case of employment injury, by region, (multiple responses) Figure 6.2 Extent of legal coverage by employment injury scheme, Figure 6.3 Active contributors or protected persons as a percentage of working-age population and employment, latest available year.. 68 Figure 6.4 Inequities in access to maternal health services in rural and urban areas, latest available year (percentage of live births) Figure 6.5 Inequities in access to maternal health services by wealth quintile by national income level of countries, latest available year Figure 6.6 Maternity legal provision: Types of programmes worldwide, Figure 6.7 Legal duration of maternity leave worldwide, 2009 (weeks) Figure 6.8 Amounts spent on paid maternity leave per year and per child, selected countries, latest available year (US$ current) Figure 7.1 Means-tested and non-means-tested benefit expenditure, European countries, 2007 (percentage of GDP and ratio) Figure 7.2 Means-tested benefits in European countries: Totals and by function, 2007 (percentage of GDP) Figure 7.3 Social assistance expenditure, 75 countries, 2008 (percentage of GDP) Figure 7.4 Social protection expenditure by type (ADB definitions), selected countries, 2008 (percentage of GDP) Figure 8.1 Social security expenditure by region, weighted by population, latest available year (percentage of GDP) Figure 8.2 Social security expenditure by income level, weighted by population, 2000 compared with latest available year (percentage of GDP) Figure 8.3 Social security expenditure by income level and branch, weighted by population, latest available year (percentage of GDP) Figure 8.4 Social security expenditure by vulnerability and branch, weighted by population, latest available year (percentage of GDP) Figure 8.5 Size of government resources (ratio of government expenditure to GDP) and amount of social security expenditure (percentage of GDP), latest available year Figure 8.6 Size of government resources (ratio of government expenditure to GDP) and GDP per capita, latest available year (international $ PPP) 85 Figure 8.7 Share of government spending invested in social security and size of government (ratio of government expenditure to GDP), latest available year xi

14 World Social Security Report 2010/11 xii Figure 8.8 Percentage of lower-income persons (first three income quintiles) reporting unmet health needs, and public spending on health (percentage of GDP), European Union countries, Figure 8.9 Non-pension cash transfers: Reduction in poverty risk, European Union countries, Figure 8.10 Percentage reduction in the Gini coefficient, and share of social security cash transfers in household incomes, 22 OECD countries, mid Figure 8.11 Poverty rates and social security expenditure for persons of working age and retirement age, OECD countries, mid-2000 (percentages). 94 Figure 8.12 Structure of the ADB Social Protection Index Figure 8.13 Investments in social protection: Expenditure (percentage of GDP) in Asian countries for three SPI indicators Figure 9.1 Components of the typology by level of income Figure 10.1 Number of unemployed receiving social security unemployment benefits, weighted average, selected countries, (Index value 100 = anuary 2008) Figure 10.2 Number of unemployed receiving unemployment benefits, selected countries, trends Figure 10.3 Thailand: Number of unemployed receiving unemployment benefits (monthly), and trends in the proportion of total unemployed receiving benefits, (percentages) Figure 10.4 Real investment returns of pension funds, OECD countries, 2008 (percentages) Boxes 1.1 Individual and societal need for protection by social security An introduction to the terminology Social security for migrant workers Argentina, policy responses to the crisis: A stimulus package Annex tables Part A. The demographic, economic and labour market environment Demographic indicators Table 1. Demographic trends: Dependency ratios Table 2. Demographic trends: Ageing Table 3 Fertility rates, infant and maternal mortality rates, and life expectancy at birth Table 4 Life expectancy at 20 or 60 years old, exact age x, both sexes (in years) 150 Labour force and employment indicators Table 5 Labour force to population ratios at ages Table 6 Labour force to population ratios at ages Table 7 Youth employment to population ratio at ages Table 8 Employment to population ratio at ages

15 Contents Table 9 Status in employment (latest available year) Table 10 Unemployment as a percentage of the labour force Economic and poverty indicators Table 11 Poverty and income distribution Table 12 Levels of vulnerability Table 13 GDP and Human Development Index (HDI), various years Part B. Social security coverage and expenditure Social security legal provision Table 14 Ratification of ILO social security Conventions, by region Table 15 Overview of social security statutory provision Table 16 Social security statutory provision: Old age Table 17 Social security statutory provision: Employment injury Table 18 Social security statutory provision: Unemployment Table 19 Social security statutory provision: Regional estimates Table 20 Maternity social security legal provision xiii Social security indicators of effective coverage Table 21 Indicators of effective coverage worldwide: Old age. Active contributors and elderly who receive an old-age pension, latest available year (percentages) Table 22a Indicators of effective coverage worldwide: Unemployment. Unemployed who actually receive benefits, latest available year (percentages) Table 22b Indicators of effective coverage worldwide: Unemployment during the financial crisis Unemployed receiving unemployment benefits, monthly data, selected countries Table 23 Indicators of effective coverage: Employment injury Active contributors or protected persons, selected countries Table 24 Indicators of effective coverage: Occupational injury. Cases of injury with lost workdays, selected countries (total cases: fatal and non-fatal) 255 Social security expenditure Table 25 Public social security expenditure, 2000 and latest available year (percentage of GDP) Table 26 Public social security expenditure by branch, latest available year (percentage of GDP) Specific health indicators Table 27 Total (public and private) health care expenditure not financed by private households out-of-pocket payments (percentages) Table 28 Health coverage and access to medical care: Births attended by skilled health staff, and child immunization Table 29 Multiple dimensions of health coverage, by levels of vulnerability

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17 Abbreviations ADB ANSES ASSEDIC CCT CIS CLEEP COFOG DB DC DWA DWI EAP ECLAC ESSPROS EU Asian Development Bank Administración Nacional de la Seguridad Social (Social Security Administration) (Argentina) Association pour l emploi dans l industrie et le commerce (Association for Employment in Industry and Trade) (France) conditional cash transfer Commonwealth of Independent States Comprehensive Livelihood and Emergency Employment Programme (Philippines) Classification of Functions of the Government (United Nations) defined benefit defined contribution Decent Work Agenda (ILO) Decent Work Indicators (ILO) economically active population Economic Commission for Latin America and the Caribbean European System of Integrated Social Protection Statistics European Union EUROSTAT Statistical Office of the European Communities GDP Gross Domestic Product GESS Global Extension of Social Security database (ILO) GFS Government Finance Statistics (IMF) HBS Household Budget Survey HDI Human Development Index (UNDP) ICLS International Conference of Labour Statisticians ILC International Labour Conference ILFS Integrated Labour Force Survey IMF International Monetary Fund xv

18 World Social Security Report 2010/11 xvi ISSA International Social Security Association KILM Key Indicators of the Labour Market (ILO) LABORSTA Labour Statistics database (ILO) LFS Labour Force Survey MDGs Millennium Development Goals NHIS National Health Insurance Service (Ghana) NREGA National Rural Employment Guarantee Act (India) OECD Organisation for Economic Co-operation and Development OMC Open Method of Coordination (EU) PAYG Pay As You Go PPL paid parental leave PPP purchasing power parity SME small and medium-sized enterprise SOCX Social and Welfare Statistics: Social expenditure database (OECD) SPC Social Protection Committee (EU) SPI Social Protection Index (ADB) SSA Social Security Administration (United States) SSI Social Security Inquiry (ILO) TME Tripartite Meeting of Experts (ILO) UNDP United Nations Development Programme WHO World Health Organization WHOSIS WHO Statistical Information System

19 Executive summary Objective and structure of the report There is little hope that the Millennium Development Goals will be reached without a decisive global move towards introducing a national social protection floor of basic social security benefits in countries where no such scheme exists or where they have only limited coverage. Sound social security policies have to be based on facts and figures. This report provides that factual basis to support the development of national social security policies. It is the first in a series of World Social Security Reports which will also help to monitor the global progress on social security coverage and thus support the ILO s campaign to extend coverage. It deals first with the scope, extent, levels and quality of coverage by various social security branches; it then examines the scale of countries investments in social security, measured by the size and structure of social security expenditure and the sources of its financing; and finally presents the nature of social security responses to the crisis as a thematic focus. The main objective of the current report is to present the knowledge available on coverage by social security in different parts of the world, and to identify existing coverage gaps. can be directly measured only separately for each of the specific branches, such as health care, old age or unemployment; or even for a group of specific schemes within each branch. There is no universally accepted methodology to aggregate these branch-specific coverage indicators into one overall indicator. However, the report makes an effort to provide at least a technical synopsis of the individual dimensions of coverage and the size of national social protection expenditure. Some level of protection by social security exists in nearly all countries, though only a minority of countries provide protection in all branches. There is no country in the world without any form of social security, but in many countries coverage is limited to a few branches only, and only a minority of the global population has both legally and effectively access to existing schemes. Only one-third of countries globally (inhabited by 28 per cent of the global population) have comprehensive social protection systems covering all branches of social security as defined in ILO Convention No Taking into account those who are not economically active, it is estimated that only about 20 per cent of the world s working-age population (and their families) have effective access to comprehensive social protection. 1 Main general fi ndings The notion of social security used here has two main (functional) dimensions, namely income security and availability of medical care. Social security coverage Social health protection coverage Although a larger percentage of the world s population has access to health-care services than to various cash benefits, nearly one-third has no access to any health facilities or services at all. For many more, necessary

20 World Social Security Report 2010/11 2 expenditure on health care may cause financial catastrophe for their household, because they have no adequate social health protection which would cover or refund such expenditure. Coverage by social security pensions: Income security in old age Coverage by old-age pension schemes around the world, apart from in the developed countries, is concentrated on formal sector employees, mainly in the civil service and larger enterprises. The highest coverage is found in North America and Europe, the lowest in Asia and Africa. Worldwide, nearly 40 per cent of the population of working age is legally covered by contributory old-age pension schemes. In North America and Europe this number is nearly twice as high, while in Africa less than one-third of the working-age population is covered even by legislation. Effective coverage is significantly lower than legal coverage. With the exception of North America and to a lesser extent Western Europe, effective coverage is quite low in all regions. In sub-saharan Africa only 5 per cent of the working-age population is effectively covered by contributory programmes, while this share is about 20 per cent in Asia, the Middle East and North Africa. In Asia some countries have made major efforts to extend coverage beyond the formal sector. At the same time, while in high-income countries 75 per cent of persons aged 65 or over are receiving some kind of pension, in low-income countries less than 20 per cent of the elderly receive pension benefits; the median in this group of countries is just over 7 per cent. Coverage of income support systems for the unemployed Present entitlements to unemployment benefits tend to be restricted to those in formal employment, and exist mostly in high- and middle-income countries. In a large part of the world where extreme poverty is high, the very concept of unemployment seems to be irrelevant, as everybody has to work in order to survive. Of 184 countries studied, statutory unemployment social security schemes exist in only 78 countries (42 per cent), often covering only a minority of their labour force. Coverage rates in terms of the proportion of unemployed who receive benefits are lowest in Africa, Asia and the Middle East (less than 10 per cent). Coverage of minimum income support benefi ts and other social assistance In most countries with developed social security systems a large part of the population is covered by social insurance schemes, while social assistance plays only a residual role, providing income support and other benefits to the minority who for some reason are not covered by mainstream social insurance.1 In the European Union (plus Iceland, Norway and Switzerland), expenditure on means-tested benefits does not exceed 3 per cent of GDP on average, while total social protection expenditure is on average over 25 per cent. While there are countries in the European Union (such as Ireland, Malta and the United Kingdom) where a relatively high share of social security benefits is delivered through targeted social assistance, nowhere does total social assistance benefit expenditure exceed 5 per cent of GDP. While in most of the developed countries (except Australia and New Zealand) social assistance-type schemes play an important although residual role in closing relatively small coverage gaps, in many middleand low-income countries non-contributory income transfer schemes have been recently gaining importance. Particularly in countries with large informal economies and where only a minority are covered by social insurance schemes, non-contributory social security provides an opportunity not only to alleviate poverty but also at least in some cases to fill a large part of the sizeable existing coverage gaps shown in this report. In fact, the most promising innovations that can help to cover the global coverage gap are conditional or unconditional cash transfer schemes in a number of developing countries, i.e. tax-financed social assistance schemes, such as the Bolsa Família scheme in Brazil, the Oportunidades schemes in Mexico, the social grant system of South Africa, or universal basic pension schemes in countries such as Namibia and Nepal. Coverage by other branches of social security Most countries in the world offer some coverage for work-related accidents and diseases. Coverage is generally limited to those working in the formal economy, and even there effective coverage is low with only 1 Australia and New Zealand are the most prominent exceptions among OECD members; in these countries income-tested benefits play a dominant role in the provision of social security.

21 Executive summary a certain portion of accidents reported and compensated. In the informal economy prevailing in many lowincome countries, conditions and safety of work are often dramatically bad, accidents and work-related diseases widespread and with no protection at all for their victims. Globally, estimated legal coverage represents less than 30 per cent of the working-age population, which is less than 40 per cent of the economically active. Reducing maternal, neo-natal and under-5 mortality through social security maternity benefits is globally among the greatest challenges of social protection; it concerns 11 million children who die before the age of 5, and 500,000 mothers dying during maternity (WHO, 2005). Coverage of cash benefits before and after birth is limited to formal sector employees. Differences in access to health care in the context of maternity protections between countries at different income levels and within countries are striking. In low-income countries no more than 35 per cent of all women in rural areas have access to professional health services, while in urban areas the access rate amounts to an average of about 70 per cent, which is still more than 20 percentage points lower than the access in high-income countries (where it is nearly complete). Investments in social security and a tentative summary On average, 17.2 per cent of global GDP is allocated to social security. However, these expenditures tend to be concentrated in higher-income countries as shown in figure S.1, and so this average does not reflect the situation for the majority of the world s population, who live in lower-income countries where much less is invested in social security. Although this prevailing pattern shows a strong correlation between income levels and amounts of resources allocated to social security, it cannot be concluded there is no fiscal or policy space for lower-income countries to decide on the size of their social security system. Countries with a similar level of GDP per capita may take very different decisions as to the size of the public sector. And at any size of government, countries have some choice as to what portion of public resources to invest in social security. Despite methodological difficulties we attempted to build a first approximation of a typology of situations in different countries, i.e. of factors that ensure success in terms of social security coverage. The typology uses two input factors (legal foundations built, sustained level of resources committed), and a proxy for effective and good quality coverage as an output measure. Not all the theoretically possible combinations of different factors occur in reality: not even the widest legal foundations can ever result in adequate coverage outcomes if they are not enforced and not backed by sufficient resources. But strong legal foundations are a necessary condition for securing higher resources; there are no national situations where generous resources are available despite the lack of a legal basis. In 29 per cent of 146 countries that were analysed, a comprehensive legal basis and high levels of resources coincided with high levels of good quality coverage. 3 Figure S.1. Social security expenditure by income level and branch, weighted by population, latest available year (percentage of GDP) Total public social security expenditure as a percentage of GDP which is composed of: Public health Percentages Public old age Other pensions: Survivors and disability Public unemployment Low-income countries Medium-income countries High-income countries Public family allowances Other social security benefits Link: Note: The number of countries for which detailed social security data on expenditure by branch are available is smaller than the number of countries covered for the calculation of total expenditure as presented in fi gure 8.2. This explains some differences in the results for total expenditure. Source: ESSPROS (European Commission, 2009a). See also ILO, GESS (ILO, 2009d).

22 World Social Security Report 2010/11 4 Thematic focus: Social security in times of crisis In addition to providing income replacement for those who lose their jobs, thus safeguarding them from poverty, social security benefits also have major economic impacts through stabilizing aggregate demand. And, contrary to earlier beliefs, no negative effects on economic growth of increased social spending during and after crises have been found. On the contrary, welldesigned unemployment schemes and social assistance and public works programmes effectively prevent long-term unemployment and help shorten economic recessions. In those countries reviewed that have at least elements of comprehensive social security responses in areas such as pensions, health schemes or family benefits, the main crisis responses are usually automatic increases in number of beneficiaries and expenditure as well as expansions in coverage and in benefit levels of existing schemes, except for a limited number of countries which have been forced by circumstances to actually decrease benefits or to narrow coverage. Measures expanding benefits and coverage can be found everywhere in high-, medium- and lowincome countries. Where they exist, unemployment insurance schemes are the branch of social security that bears the brunt of costs of income replacement for employees who have lost their jobs. But unemployment insurance schemes are in place in only 64 of the 184 countries for which information is available. Social assistance, public works and similar programmes also have very limited coverage globally. In the economic crises of past decades which affected countries such as those in Asia and Latin America where social security schemes were absent, it proved to be difficult if not impossible to introduce new schemes or ad hoc measures quickly enough to cushion the impact of the crisis. But countries which had introduced unemployment schemes before the onset of the crisis, such as the Republic of Korea, could relatively easily scale up these measures to respond in an appropriate and timely way. In 46 high-, medium- and low-income countries analysed, government responses are found in all the three groups of countries providing income support to the unemployed. The most common responses in high-income countries are modifications of existing unemployment schemes. Since past recessions have led to higher structural unemployment in some Western European countries, in this crisis government strategy in a number of countries, such as France, Germany and the Netherlands, aims at the avoidance of full unemployment by expanding the application, eligibility and coverage of partial unemployment benefits. Partial unemployment benefits allow workers to stay in their employment relationship, but for example with reduced working hours. They aim at preventing the loss of skills and the discouragement of workers, both of which may occur when they become fully unemployed. The most common form of response in middleincome countries is the extension of cash transfer schemes (for example, in Brazil) or public employment schemes (for example, in the Philippines). The latter often have an ad hoc character: they may be implemented more quickly than social security schemes, and discontinued once the crisis is over. The availability of measures for crisis response is clearly the most limited in low-income countries. Schemes providing income support in case of unemployment exist, but rarely. In addition, many of these countries, in particular in sub- Saharan Africa, were already facing mass poverty and underemployment well before the recent global economic crisis. Corrections to pension schemes might also be required in all countries where schemes were reformed during the last three decades. The crisis and the consequential losses in pension reserves clearly demonstrated the vulnerability of pension levels, and hence old-age income security, to the performance of capital markets and other economic fluctuations. The unpredictability of pension levels may be reduced by introducing defined-benefit-type guarantees into defined-contribution schemes, or by guaranteeing rates of return in such a manner as would provide replacement rates on retirement at target levels. There remains a risk that countries that followed an expansionary fiscal policy during the crisis will now face pressure for fiscal consolidation to cope with increased deficits and public debt. If and wherever it happens, this may result in future cuts of social security spending to even below pre-crisis levels. This may not only directly affect social security beneficiaries and consequently the standards of living of a large portion of the population but also, through aggregate demand effects, slow down or significantly delay a full economic recovery.

23 Executive summary Conclusions The current crisis has once more proved how important a role social security plays in society in times of crisis and adjustment. It works as an irreplaceable economic, social and political stabilizer in such hard times both for individual lives and the life of society as a whole. Social security plays this role in addition to its other functions providing mechanisms to alleviate and also to prevent poverty, to reduce income disparities to acceptable levels, and also to enhance human capital and productivity. Social security is thus one of the conditions for sustainable economic and social development. It is a factor in development. It is also an important factor in a modern democratic state and in society. This report clearly shows that the majority of the world population still has no access to comprehensive social security systems. Thus, to prepare global society for future economic downturns and to achieve other global objectives such as the Millennium Development Goals, sustainable economic development and a fair globalization, a fundamental task is to develop comprehensive social security systems in countries where only rudimentary systems exist so far, starting with the provision of basic income security and affordable access to essential health care. The ILO is promoting the reshaping of national social security systems based on the principle of progressive universalism. Inter alia, the Global obs Pact, adopted by the International Labour Conference in une 2009, advocates ensuring a minimum set of social security benefits for all a social protection floor. Based on that floor, higher levels of social security should then be sought as economies develop and the fiscal space for redistributive policies widens. 5

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25 Introduction Context, objectives, scope and structure of the report Social security is a fundamental human right recognized in numerous international legal instruments, in particular the Declaration of Philadelphia (1944), which is an integral part of the Constitution of the International Labour Organization (ILO), and the Universal Declaration of Human Rights (1948) adopted by the General Assembly of the United Nations. More recently, the ILO Declaration on Social ustice for a Fair Globalization was adopted by the International Labour Conference (ILC) at its 97th Session (2008). The Declaration recognizes that the ILO: based on the mandate contained in the ILO Constitution, including the Declaration of Philadelphia (1944), which continues to be fully relevant has the solemn obligation to further among the nations of the world programmes which will achieve the objectives of full employment and the raising of standards of living, a minimum living wage and the extension of social security measures to provide a basic income to all in need, along with all the other objectives set out in the Declaration of Philadelphia. (ILO, 2008a, Annex, Part II, Section B) In recent years ILO work on social security has been conducted within the framework of the Global Campaign on Social Security and Coverage for All, as mandated by the International Labour Conference of The Campaign focuses on the fact that there still remain many countries in the world where social security coverage is low, particularly among those with low- and middle-income levels. The ILO believes that the best strategy for progress is for these countries to put in place a set of basic social security guarantees for all residents as soon as possible, while planning to move towards higher levels of provision as envisaged in the Social Security (Minimum Standards) Convention, 1952 (No. 102) as their economies develop. At the same time such a strategy would significantly help countries to achieve their Millennium Development Goals. Although social security is a human right, only a minority of the world s population actually enjoys that right, while the majority lacks comprehensive and adequate coverage. More than half lack any type of protection at all. In sub-saharan Africa and South Asia, the number of people with access to even the most rudimentary protection is estimated to be less than 10 per cent. And people in these countries need social protection, in particular when facing additional demographic and labour force challenges due to the impact of HIV/ AIDS. In 2001 the International Labour Conference laid the foundation for a sustained ILO effort to address this challenge, by calling for a major campaign to promote the extension of social security coverage. The Global Campaign on Social Security and Coverage for All was officially launched at the 91st Session of the Conference in 2003 by ILO Director-General uan Somavia, who said: Social security systems contribute not only to human security, dignity, equity and social justice, but also provide a foundation for political inclusion, empowerment and the development of democracy. Well-designed social security systems improve 7